Category Archives: China

We did Xi Jinping proud

I am glad that we did Xi Jinping and his lovely wife proud. The splendour of his welcome will be noted and very well received in China.

I am glad that we did Xi Jinping and his lovely wife proud. The splendour of his welcome will be noted and very well received in China.

There has been much ado about our kow-towing to the Chinese during the recent visit of the Chinese president, Xi Jinping and talk of our being a puppy in danger of being put on a leash. I believe these worries to be misplaced. China is a fact on the modern world stage with its second largest economy. What it does or does not do impacts all of us.

The first major western power to seriously engage with her will reap a rich reward. She has been unable to achieve this with the country she would most like to, namely the United States, so she turns to the country she regards as the next most significant.

The reason she can make no headway with the US is that Uncle Sam confronts her militarily in East Asia, being locked in a web of alliances with regional powers there. At the core of the dispute is our old friend, oil. Huge deposits have been found in the South China Sea bordering on five East Asian countries that are all insistent that they have rights there. Also, the clamour of protests about job losses to the Chinese and internet piracy is greater there, as is the human rights lobby. Of course, all of these things are important and we would be foolish to ignore them.

But take steel as the most recent example. Just as we cannot manipulate the price of oil, so we are unable to do so with steel. With world demand slowing down – yes, led by China – there is a glut of it. Dumping is an inevitable consequence and we must deal with it.

Steel production is strategic; we cannot therefore lose the industry completely. We must be in a position to fire up those coke furnaces at some point in the future if the situation requires it. China and the rest have to realise that they must take their share of the pain by reducing capacity. Furthermore, it must boost home demand by turning itself into much more of a consumer society. The steel issue is exactly the sort of case in which the clout of the EU could achieve the required result where we alone could not.

Our relationship with China is more longer-standing than that of any other Western nation. They understand that and this is one of reasons they have turned to us. We were the very first to engage with them and introduce them to Western ways all those years ago, when we sent Lord McCartney on a trade mission to the ‘Celestial Kingdom’ in 1793. Famously, he refused to kow-tow, as required, to the ‘Son of Heaven’. Then, 150 years of ruling Hong Kong gave us an understanding of the Chinese psyche not vouchsafed to any other Western power.

They are touchy, to put it mildly, about being lectured by outsiders on human rights or anything else for that matter. They still see themselves as unique among humans. Being crushed in two opium wars by McCartney’s heirs didn’t change that perception. And their conception of human rights has a different slant to ours; they argue that lifting hundreds of millions out of poverty whilst maintaining stability is very much paying attention to human rights. They wonder why the West pays so much attention to them while it sucks up to primitive, atavistic Arab regimes who publicly crucify and behead teenagers. If they are lambasted for the number of executions in their country, remember that they number 1.3 billion. It is a nonsense to say they execute more than Iran or Saudi Arabia when those countries number 70 and 28 million respectively. Proportionately, China is way below them.

I personally take the view that nothing will achieve success, as we would like it, in China than that she become richer. Rich people are not so easily pushed around. The human rights of our own people were once – and not so very long ago – severely circumscribed. But in a thirty-year period in the nineteenth century, per capita income in Britain grew by 500% – a growth rate never before seen in human history. Our people became freer than they had ever been with trades Union rights guaranteeing that the days of gross employer and landlord exploitation were over for ever.

China sees that the soft power that our country enjoys all around the world with its Commonwealth contacts, its EU membership, its command of the world’s number one language and its close, familial association with the US – still the dominant power on the planet – makes us the nation of choice to cultivate. Also not lost on them is the fact that we are now the fastest growing economy in the Western world, with more jobs created last year than the whole of the EU put together. All these things and more confirm our relevance in their eyes. Also our ‘open for business’ outlook on the world goes down very well with them, as do our elite schools, peerless universities and exciting cultural attractions. Even being the home of James Bond makes us more interesting.

My own view is that, if we play our cards right, we and China could have a very exciting future together. Our joining the recently created and Chinese-sponsored Asian Development Bank may have annoyed the US, but it makes a great deal of sense and demonstrates to the Chinese that we are capable of acting independently of our former colony.

Trade enriches the world. It’s what makes it go round. It breaks down barriers and improves our understanding of each other. It makes war less likely with there being too much to lose and it addresses perhaps mankind’s most pressing problem: its ballooning population. No rich country has a high birth rate any more than a poor record on human rights abuses. Trade is what got the West where it is today; truly it is king.

So I am glad that we did Xi Jinping and his lovely wife proud. The splendour of his welcome will be noted and very well received in China. Even Jeremy Corbyn behaved himself.

Soon we will be receiving the Prime Minister of India, in whose land two million of our forefathers lie buried. We can do no less for him. That exotic, cricket loving country has a very special place in our hearts. Because of the institutions we left it with, not least our language, law, and democratic ways, it has a head start on China. I wouldn’t be surprised if, one day, it were to outpace China.

Advertisements

Beijing is fighting the tide of history

A Tiananmen Square solution to the protests is no longer an option in this media savvy world.

A Tiananmen Square solution is no longer an option in this media savvy world.

I sometimes think that China believes it should receive special treatment and indulgences from the rest of the world. It seems to have got it into its head that it is a case apart, and that the rest of the world has no place in offering it advice, much less in criticising it. Take what is going on in Hong Kong at the moment. The people of that former colony of ours are asking no more than that China honour the agreement standing when we departed the colony in 1997 – including the ability to choose their own administrators. That seems fair enough, doesn’t it? Yet having a list of approved candidates presented to them by the Communist authorities in Beijing, which inform them that they can chose any one of these, is not quite what the rest of us understands as free choice. It’s like when Henry Ford quipped about his Model T that you can have any colour as long as it’s black. For Beijing, read red.

But Beijing dreads any move in the direction of opening up Chinese society, even though the drumbeat for change grows louder every day. The Central Committee remains fixated on what became of the Soviet Union under Gorbachev when he recognised the inevitable and began the process of cutting the people a bit of slack. Look where that got him, Beijing says to itself. The result of the ending of the Cold War is that there are three times the number of democracies in the world today as there were at that time.

Try as the Communist authorities might to control the flow of information, they know that with the advent of the computer and, even more so, the world wide web and social media, it becomes daily more difficult to keep people in the dark. A while back I heard that years passed and there were still people in China who did not know that the Americans had landed a man on the moon. It didn’t fit with Communist orthodoxy which held that capitalist science was inferior to their own, so they kept quiet about it. There are echoes here, too, of that chap who fought on in the jungles of Southeast Asia for twenty-seven years after war’s end because he did not know that the atomic bomb had been dropped and that it was all over. Such situations are inconceivable in today’s world. Incidentally, the man was feted on his return to Japan and said only that he was awaiting orders from his commanding officer. Some wait!

Beijing and its leaders know that the tide of history is against them. No doubt their hope is that they can put off the evil day beyond their own lifetime so that they can continue to bask in the aphrodisiacs of total power. They thought they had identified Gorbachev’s mistake – that of opening up society rather than delivering the goodies that mysteriously only capitalism seemed able to produce. So they abandoned the command economy and Marxist economics and plunged, pell-mell, into capitalism. That made a nonsense of everything that Mao and the Long March stood for, but that didn’t matter so long as it enabled them to hang on to power. The worrying thing for the rest of us is that, having performed that astonishing conjuring trick, they seem unable to realise that a wealthy man – and there are a great many in China today – is not so accepting of orders as a poor man. He may have been willing to forego liberties in pursuit of getting out of the gutter, but once out he wants to breath the sweet air of liberty. That is the Politburo’s dilemma and it is an impossible one to solve in a way that allows it to keep power. Trying to square that intractable circle is further complicated by a very dangerous legacy of history.

China, I fear, has something of a contempt for the rest of humanity. For so long it considered itself the centre of not just the world, but of the Universe – and in many respects it was (at least of the world that followed, Persia, Greece and Rome). Although imperially ruled, with the usual aristocratic class, it did have advancement for the plebs by examination – the Mandarin system. So convinced was it that it had nothing to learn from the rest of the world that it did a North Korea and sealed itself off from what it considered the contaminating influences of its fellow humans, deeming them “barbarian”.

Our own Lord McCartney’s high-powered, governmental trade mission to the Celestial Kingdom in the 18th century turned out to be a very strange affair, bearing in mind that he was a “barbarian”. While the emperor’s court was in awe of McCartney, his entourage and even more so of what he had brought with him, the great man himself was nonplussed and uncomprehending. He was even disdainful. Yet here before him was a pro-consul of the mightiest power on earth, whose nation was in the process of changing the face of humanity with its Industrial Revolution. He was laden with a vast array of the products of that revolution, several of which the emperor played with like a little child.

Yet in the end, the ‘Son of Heaven’ turned his back on them (the only thing he couldn’t resist were clocks). “Go back to your master, King George,” he said, “and thank him. Tell him that we have everything we need, but he is welcome to do homage to me as do all the other rulers of the earth.” And that was that. China, in the years following, paid a terrible price for such highhandedness. Two maritime wars with the new super power laid it prostrate and humbled with the Victorians seriously considering annexing it. In the process it was forced to engage with those products it had so scornfully rejected a hundred years before. It is only now recovering and turning out those same products itself.

Until recently, China refused to believe the ‘Out of Africa’ origins of the human race. It actually believed that they had quite separate beginnings to the rest of us. For a long time we all thought that Homo sapiens shared the world with only one other kindred species: Homo neanderthalensis, or Neanderthal Man. Then on a small island called Flores in Indonesia, a new hominid was found. He was only a metre tall and was nicknamed Hobbit. Although from the east, China would have no truck with being related and, indeed, he wasn’t except in the wider Homo sense. Soon after, but this time on the mainland of Asia itself, quite close to China, was found a new but normal sized hominid which we called Denisovan Man (named after Denis, a Russian hermit who lived where the fossils were discovered in the 18th century). Still China insisted it was distinct.

Finally those illusions were shattered when a new science was brought to bear: DNA. It had no choice but to accept that ‘Out of Africa’ hypothesis – that it was just like the rest of us and was once black with frizzy hair. China has now joined the comity of nations and needs all of us just as much as we need it. But its grievances at past humiliations and present ambitions will have to be contained, and that’s not going to be easy. It never, historically, interested itself in the world beyond Asia – except for one brief period in the 15th century when it built a gigantic fleet with ships four times larger than Europe’s, stuffed with presents for the ‘ignorant savages’ who did not have benefit of his imperial rule but who could, nonetheless, submit to the overlordship of the ‘Son of Heaven’. It reached as far as the east African coast. At that point in time it could have stopped Europe in its tracks, since it preempted Magellan’s circumnavigation by seventy years and been itself the great exploring power which opened up the world. But once again its insularity when a new, less enterprising emperor came to power was its undoing. He ordered the fleet destroyed and imposed death on anyone caught building a sea going vessel.

The nations which now have to band together to resist China’s present ambitions are those of Southeast Asia, particularly those around the South China Sea where large oil deposits have been found. Meantime it is preoccupied with its standoff with Hong Kong’s dissidents who, sooner or later, will prove the catalyst for opening up the whole of China. A Tiananmen Square solution is no longer an option in this media savvy world. And besides, it knows that should it apply such a method it can whistle goodbye to the people of Taiwan ever agreeing to reunite with the motherland. For that is its most cherished territorial ambition.

China’s long history makes it a country that thinks in centuries. Thankfully it is a nation which seldom acts hastily, and once it has been persuaded to come down from that pedestal it has perched on for so long it will become a good friend and contributor to the rest of humanity.

We have introduced a virus into the body politic of China

A state-sponsored collective amnesia has blanketed the Chinese people.

A state-sponsored collective amnesia has blanketed the Chinese people.

In this world of falsehoods, duplicitous behaviour and double dealing the one thing we must all strive for above all others is truth. My wife grew up in a world heavy with the former and very little of the latter – the Soviet Union. The worst of it was that those negatives were state-sponsored, with a challenger facing the prospect of a bullet in the back of the head, the Gulag or in the later years after Stalin’s death being assigned to the madhouse, there to be medicated with mind-bending drugs which effectively turned them into a zombie.

The thinking was that if you couldn’t see the benefits of Communism you must, indeed, be mad. In true Kafkaesque, they even named the regime’s leading newspaper ‘Pravda’, which in Russian means truth. Yet for all the suffocating and malign effects of government policy, people did know much of the truth. Today’s N. Korea is an out-on-its-own, bizarre exception. Nothing in all human experience quite compares with what they do there. However, in order to get a decent job and stay out of trouble with the Soviet version, the bulk of the people chose to play the system and not challenge it. Only in the anonymity of the kitchen did they dare to speak their true thoughts.

Thankfully that system has been consigned to the dustbin of history and my wife’s once occupied people, the Lithuanians, can breathe the sweet air of Liberty – guaranteed, I’m proud to say, by our own RAF (among others) jets which daily sweep their skies. We in Europe congratulated ourselves that our own steadfastness – mightily reinforced, I have to say, by Uncle Sam – has seen off the dead hand of tyranny in our own continent. Only the single, anomalous state of Belarus remains to remind us of the awfulness of the system which prevailed for so long.

But far away, across the other side of the world, an eastern version staggers on. Full of absurd contradictions, it has loosened the economic purse-strings to such an extent that to pretend it reflects the thoughts of Marx and Engels is to put us back once more into the realms of Kafka. However, in terms of the suppression of liberties it is still very much in the mould of the old masters. I refer, of course, to Communist China.

This year marks the twenty-fifth anniversary of the student uprising in Tiananmen Square in which, after much prevarication, the regime shot and crushed beneath tank tracks hundreds, perhaps over a thousand young people. All mention of that terrible atrocity has throughout this quarter century been forbidden in the Chinese media. A state-sponsored collective amnesia has blanketed the Chinese people. It is a non-event to be airbrushed from memory – except that it hasn’t, at least in a normally tranquil and prosperous part of the Middle Kingdom, which is what China liked to call itself when it considered it was the centre of the world. That corner of mainland China – where 100,000 people took to the streets in remembrance of the students – is Hong Kong. To the fury of the regime, the people there took no notice of Beijing’s ban on gatherings.

Who does the regime blame for that blatant act of defiance? Why, of course, we the British. Nearly two centuries ago we took over a little fishing village in a remote backwater and turned it into one of the great mega cities of the world. We gave it good governance and introduced the rule of law. It became a magnet for Chinese to flock to for a better life as well as jobs and prosperity. We taught them not to accept unfairness and now they turn these attitudes against their new masters in Beijing.

It may have been possible a quarter century ago before the age of social media, instant news and mobiles with millions of cameras to commit atrocities and get away with it, but not now. You may gun down a thousand people but can you gun down a hundred thousand? It is my belief that we have introduced a virus into the body politic of China, which in the fullness of time will sweep out of Hong Kong and infect the whole of China. If that is the case then we shall have done something of which we can be really proud.

China’s debt-fueled turbo growth will end in tears

The old ‘Yellow Peril’ with its racist undertones and vision of the ‘Golden Horde’ sweeping towards Europe may have been a thing of the past, but a new one is taking it place. This one is a debt crisis which threatens to take China down.

China's hypocrisy in abandoning Marxist economics to gain the fruits of the super-abundant capitalist table is breathtaking.

China’s hypocrisy in abandoning Marxist economics to gain the fruits of the super-abundant capitalist table is breathtaking.

We have all marveled at the economic miracle which has taken place in formerly backward China during the last thirty years. It is now the world’s second largest economy, and if its double-digit growth continues for one more decade it will overtake the mighty United States. But a very big if hangs over that prospect.

The phenomenal growth that China has enjoyed in recent years has been based on debt – astonishing and unsustainable debt. To make matters worse, it is mired in corruption on an equally gargantuan scale.

One of the prices we in the West have had to pay for China’s breakneck progress is to see many of our traditional industries relocate to the low-wage, low-overheads Far East. The flood of cheap consumer goods helped the West keep inflation down – at the price of seeing its own unemployment rise.

Yet all was apparently well until the banking crisis struck in 2008 and the West stopped buying – at least in the quantities it had. China faced ruin. It had two options: it could either invest heavily in infrastructure and property (it had millions to house who had flooded into the cities) or it could turn its people into a consumerist society modeled on the West and sell to itself – God knows there are enough of them. It chose overwhelmingly the first.

Unfortunately no one knows how to get the Chinese to spend on themselves. It may be this is because there is no safety net of a welfare state to sustain people either in old age or in sickness, so they have to do it themselves and save a much higher proportion of their earnings to make good this shortcoming. They decided not to put their savings under their beds but to invest it in property and to a lesser extent in factories. Unfortunately this launched a runaway property boom. Stupidly this was at the higher end of property market so that the average apartment came out at £300k – 70 times what the average factory worker earned. Consequently, while there are scores of millions in the cities desperately wanting to get out of sub-standard and crowded accommodation, they cannot afford to buy. A similar glut of unwanted factory units has taken place.

This was at the time the Chinese government had ordered its state run banks to open their wallets wide and lend. And, boy, did they obey orders. The result is a debt crisis of unimaginable proportions and one which is set to grow exponentially. The Communist government is at a loss to know what to do about it and still maintain power in a one party state.

It has long been thought an anomaly that a Marxist state can stay communist while operating a capitalist system. The reason the Chinese have so far pulled it off is they have markedly raised the standard of living in the cities – though they have neglected the countryside.  This has bought the party time in a country which elevates stability above everything and avoided people taking to the streets demanding more political freedoms. The hypocrisy of the party in abandoning Marxist economics to gain the fruits of the super-abundant capitalist table is breathtaking. China’s volte-face has allowed the party to stay in power while the USSR collapsed. It has delivered materially where the Soviets did not. But the capitalist system which Beijing let rip has none of the constraints and rule of law which developed over centuries in the West.

The ‘entrepreneurs’ which it put in place to run its factories and the like did not earn their spurs through the fierce blast of competition; they were placemen and apparatchiks who had no experience of business. They set about lining their pockets with shady deals and kickbacks which would cause Marx to turn in his grave. And because the system is run by the party faithful right across the country, from the very top all the way down to the lowest jobsworth, there is no chance of reforming it.

The party bosses in Beijing are waking up not just to the enormity of the task ahead of them to address this but to their debt crisis. They are telling their factory managers that the centre can longer subsidise their inefficiencies. They are going to have to lay off tens of millions who will be forced to return to their poverty-stricken countryside homes, many of which have been forcibly taken over by the state for land development. It is a recipe for insurrection.

Already the West is seeing many of the jobs which went to the Far East being repatriated because the economics have changed: Chinese workers have demanded, and got, big pay increases as well as better working conditions. All this costs money and the result is that the Chinese competitive edge is being eroded year by year.

When the West’s financial crisis struck in 2008, we were all enormously relieved that the world economy, chiefly driven by China, kept on growing, albeit it at a smaller pace. Now China must hope that the West’s efforts to restore order in its own financial house will be completed in time to alleviate its own coming time of distress. One pundit opined the Chinese are where we were in 2005-6, so there’s not much time. However, we must never forget that China remains a totalitarian state.

In seeking to restore its finances it has none of the experience and sophisticated tools at its disposal which Wall Street and the City have. If things go wrong, it is liable to lash out in frustration and seek a foreign adventure to rally the people and take their minds off their troubles at home. Galtieri did it over the Falkland Islands and China may well do it over those oil rich islands in the South China Sea.

The Perfect Storm

It is alarming that the markets have given a thumbs down to the Obama/Congress deal. And now we hear that they are seriously doubtful of Italy’s ability to grow its way out of the enormous debt it holds.

What with Spain teetering on the brink, and Greece, Portugal and Ireland considered lost causes, we have what amounts to ‘the perfect storm’. Yet we British have retained the market’s confidence; our willingness to bite the bullet allows us to borrow at the same rate as the Germans. But sadly that won’t save us. We absolutely have to sell our goods and services to the New World as well as the old.

43% alone of our output goes to the European Union, and another huge chunk to North America. The US Republicans – led by the Tea Party – refuse to aid a deficit cutting programme by including tax increases, even though the Federal Government’s tax take is barely half the European average. What right-minded system in today’s world allows Western drivers to fill up at not much more than half of the EU average?

Alas, Americans (and to be fair we) have been living high on the hog for too long. We in the West – especially the Americans with their consumption-driven economy – have been sating ourselves on China’s cheap goods, fueling its mind-blowing year-on-year 10% growth at the expence of increasing their own competetiveness. Industries have gone down like ninepins and jobs exported; they have allowed China to get away with a grossly undervalued currency and not to conform to World Trade Organisation rules. Perhaps most alarming of all, China stands accused of commercial and military espionage on a industrial scale by hacking into the West’s computer systems. This amounts to war by other means. So either the US treats balancing its budget almost as though it were a wartime priority, or it can say goodbye to being the world’s leading economy. Hello, China. Hello, India.

We may have been sold the idea that somethings are too big to fail, but believe me: a whole nation can fail – even the US if it hasn’t the stomach to put its house in order. The wars in Afghanistan and Iraq have done for the United States what the Kaiser and Hitler wars did for us… nigh bankrupted it. The difference is that in our case it was a noble struggle that simply had to be faced; a militaristic Germany bent on world conquest was a cause worth sacrificing even the British Empire for.

As far as the Euro is concerned, no matter how many sticking plasters they try to put over the crisis, nothing can hide the fact that the patient neeeds surgery. Greece and the others – the so called PIIGS – can’t service the debts they already have and provide for growth. And how does it help to foist more loans on them and push their service charges even higher? It’s the economics of the madhouse. They must all be cut loose; free to set their interest rates at the appropriate level; free to make a mess of things if they can’t get their act together without dragging everyone else down with them and also free to rejoin if they get their house in order and meet the strict criteria of membership, which they were meant to meet in the first place but never did.

The only alternative is for the sound economies of the north to take fiscal control of the hopeless cases in the south. In other words, a Fiscal Union to add to the unworkable existing Monetary Union. In the long run the PIIGS would all be better off. But would they stand for it? Proud, broken Greece would find it exceedingly hard to take the teutonic medicine that Frankfurt would insist they swallow.

As for poor old Britain, we are left dangling in the wind, waiting on events over which we have no control, but which are certain to turn all our lives upside down. I would hazard a guess, however, that if the Euro is reformed so that only successful economies can belong, then perhaps a very good case could then be made for us to join

There are huge advantages to be had in belonging to a truly powerful currancy bloc that might well take over as the world’s Reserve Currency. I fear the dollar’s day may be done, but I wouldn’t underestimate Uncle Sam’s recuperative powers and his legendary can-do approach when fired up. But please, please don’t let the Reserve Currency be the Yuan if Uncle Sam can’t make it.

%d bloggers like this: